INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-45 - RULES FOR PARTICULAR INDUSTRIES AND OCCUPATIONS  

Division 376 - Films generally (tax offsets for Australian production expenditure)  

Subdivision 376-C - Production expenditure and qualifying Australian production expenditure  

Production expenditure - common rules

SECTION 376-125   Production expenditure - general test  

376-125(1)  
A company ' s production expenditure on a * film is expenditure that the company incurs to the extent to which it:


(a) is incurred in, or in relation to, the * making of the film; or


(b) is reasonably attributable to:


(i) the use of equipment or other facilities for; or

(ii) activities undertaken in;
the making of the film.

376-125(2)  
The making of a * film means the doing of the things necessary for the production of the first copy of the film.

376-125(3)  
The making of a * film includes:


(a) pre-production activities in relation to the film; and


(b) post-production activities in relation to the film; and


(c) any other activities undertaken to bring the film up to the state where it could reasonably be regarded as ready to be distributed, broadcast or exhibited to the general public.

376-125(4)  
The making of a * film does not include:


(a) developing the proposal for the * making of the film; or


(b) arranging or obtaining finance for the film; or


(c) distributing the film (other than the activities listed in paragraphs (a) to (e) of item 7 of the table in subsection 376-170(2) ); or


(d) promoting the film.

376-125(5)  
Without limiting subsection (1), a company ' s production expenditure on a * film:


(a) may be expenditure that is incurred in the income year for which the * tax offset is sought or in an earlier income year; and


(b) may be expenditure of either a capital or a revenue nature; and


(c) may be expenditure that gives rise to a deduction.

Paragraph (c) has effect subject to item 10 of the table in section 376-135 (which deals with capital allowances).

376-125(6)  
If:


(a) a company:


(i) * holds a * depreciating asset; and

(ii) uses the asset, while held, in the * making of a * film; and


(b) deductions in relation to the asset are available under Division 40 (which deals with capital allowances);

the production expenditure of the company on the film includes an amount equal to the decline in the value of the asset to the extent to which that decline is reasonably attributable to the use of the asset in the making of the film (the film proportion ). The decline in value of the asset is to be worked out using Division 40 .

Note:

Under item 10 of the table in section 376-135 , expenditure that sets or increases the cost of the asset does not count as production expenditure.

376-125(7)  
If a * balancing adjustment event occurs for the asset before the film is * completed:


(a) if the asset ' s * termination value is more than its * adjustable value just before the event occurred - the production expenditure of the company on the film is reduced by the film proportion of the difference; or


(b) if the asset ' s termination value is less than its adjustable value just before the event occurred - the production expenditure of the company on the film includes the film proportion of the difference.


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